Quite often we can, but once the horse has jumped the fence and headed for the hills it is much harder to do. (One of our offices is on a equestrian farm.) You do not want to be a parent who realizes too late that the cost of four years of college is not possible without borrowing an amount that resembles the cost of a used Rolls Royce with body damage.  

No matter how often I talk about the importance of our money saving “heart attack prevention” exercise called the “Dry Run” (step # 3 in the college planning timeline) there are still families that do not take advantage of it. Of course, it is not the end of the world if the student attends a community college for a couple of years. In fact it could be a good strategy in some instances. But more satisfactory outcomes result with planning that includes an early look at the financial options all families have.   

Many families go through the college selection process content not to question the colleges’ “we have financial aid” pitch or “our average grant package is $23,000.” Wide eyed impressionable teenagers are told to “just put your application in and then apply for financial aid.” Once you are accepted “we will send you a financial aid package.” 

All that students hear (and some parents) is what they want to hear. Reality comes knocking at the door too late for many of them. Though the most frugal and financially savvy parents have saved enough to cover the first year or two, it often does not cover all four…or dare I say, five or six. To do that is very difficult without a steady source of extra income coming into the household. (By the way, we do have a solution for that too. Read the last paragraph here; then give us a call.)

In the meantime, if you have a student still in high school with college aspirations, NOW, not later, is the time to call to complete a “Dry Run”. It does not matter if the college list hasn’t been started yet either. We can suggest appropriate colleges.

This past weekend in June we saw many graduation celebrations in the towns surrounding our main office here in the heart of New England. It began about eighteen years ago for the high school seniors and who knows how many years for the college grads. (See Undergraduate Catagory below.) It seems like yesterday that I was in their shoes. Well, maybe the day before yesterday.         

The valedictorians and an assortment of college commencement speakers will have shared their words of hope and encouragement to millions of graduates by the end of June across the country. You may have heard one or two of them.

There is one speaker you will not hear at any of these celebratory events this week. But you can here. In fact, I believe anyone can benefit from his enriching words of wisdom. His name is Michael Himes. He was a Professor of Theology at Boston College.

His last lecture prior to retirement at BC was one of the most meaningful, inspirational and compassionate talks I have ever had the pleasure of hearing. I almost think that most traditional commencement speakers could be cancelled and a DVD of his last lecture simply be handed out to all the college graduates. Here is yours. Let me know what you think.    

As each spring comes and transitions into summer, I am energized with new life as I see our students conclude one phase of their education and start another. For many teenagers, it may not include college but nonetheless it is a journey toward personal growth and maturity. Hopefully, it will be more than biological maturity but emotional, spiritual and intellectual maturity as well. All of which can come about without the benefit of the college experience.

But if college is the next step, then take full advantage of it. We show students how to evaluate colleges in two important ways. First, how does the freshman class statistical profile fit their profile?  By the time the junior year is concluded, a good number of statistical measures can be seen to determine that.

Our students will do their due diligence using the AAA method. That includes seeking out the Common Data Set for each college on their list. 

Second, is the college qualified to provide the educational and social experience they are seeking? Do not measure a college by the number of professors with a PhD degree it may have. That does not mean they can teach. For example, look here at a Yale professor introducing his course in finance, Economics 252. I suggest this is one reason why our country is such poor shape financially.  Graduates are either clueless or have cleverly figured out how to “game” the system.

If you can, watch his perplexing presentation. What this professor says in the introduction to his course could be said in fifteen minutes. Someone somewhere decided that college, like high school, should be a four-year experience, as a result much of what takes up valuable class time is just inflated fluff. What is taught in four years can be covered more than adequately in three. What do you think?   

In any case, is the college faculty qualified to teach your child? And, what is it they need to learn? Those are the questions which we can help you answer. Call for a FREE “get acquainted” conversation. (978) 582-0273 or SKYPE @ (978) 582-3246

Four short years ago the college bound Class of 2006 completed their high school experience. That was a record year for student applications and competition was keen at the more competitive colleges. The American Enterprise Institute that tracks six-year graduation rates tells us that only 38% of those that went on to college are taking part in commencement ceremonies after four years as an undergraduate.

And you thought that college was going to be a four-year experience. Yes, it can be that (or less) if you do your due diligence ahead of time.   

But here are some reasons why that percentage is so shockingly low. 

1. ALL four-year colleges are considered. Both public and private from the non-competitive to the most competitive. Often large state universities and less competitive private institutions have weaker or overwhelmed advising staffs.
2. Students may fall behind on credits earned in their major.
3. They change majors more than twice; credits are not transferable.  
4. Students drop out for academic or affordability reasons.
5. Some classes are over enrolled, limited or cutback and students are not able to take the prerequisite courses in their majors in a timely fashion.

When researching each college using the AAA method a student will be better prepared to avoid most of the above scenarios. This includes understanding the data the colleges are required to report on the Common Data Set. If you do not find the CDS on the college website, ask admissions for it.

In any case, as the title of this entry states, if the Class of 2010 thought it was competitive getting into college, they are in for a bigger challenge now. Job prospects for new college graduates are at historic lows, partly caused by financial misfeasance and malfeasance on a global scale. If a recent graduate has some internship or cooperative work experience to show on his or her resume, that will help. But with the economy what it is, the challenges still remain.

The average student loan debt for graduating seniors in 2008 was $23,186. This year, I dare say the average will be at least $26,000 because the government made additional Stafford loans available to students since 2008. But that does not take into account co-signer or Plus loans that parents may have been taken out during college.

If loans are a burden, parents and students should not hesitate to call us now. We have a sure-fire plan to show you how to become debt free sooner than you think. It makes no sense in starting off with a job that does not afford you the ability to pay basic necessities, provide the comforts and lifestyle you want to have and still meet monthly debt obligations.  

       In the meantime, graduates, get ready for the toughest job you will have.

Start by reading this timely New York Times article ~ How to market yourself.

What about the 2064 “unknown” colleges. Which of these colleges are worth exploring?  When all is said and done, does it matter that much where one goes to college?  If you are not looking for a specific program only offered at a particular college, it matters less than you think. What really matters is what you do when you get there.

Some students realize that it might not be a bad idea to look at two-year colleges as well. And some of them are looking at two year colleges outside of the region in which they live. If there is a community college that is beyond commuting distance but has a specific program you are interested in taking, you can rent an apartment near the campus. Many colleges such as Greenfield Community College in Massachusetts or the Ivy Tech Community College system in Indiana, can recommend student housing for such students.

Occasionally I like to step back and look at the colleges whose offerings make them stand out. It does not mean they are right for you. But one or more of them could be.

Let me take you on a brief tour of just five of them now.

They are not in any particular order, but # 1 on the list is a two-year college. In fact, this two-year college is tougher to gain admission than is Harvard. Though they are shocked at first, I get a kick out of telling some extremely bright students that they will not have a prayer in being accepted to this college.  Here is why.   

1.)  Deep Springs College accepts only thirteen men into its two-year program each year. It is a rigorous admissions process including several interviews and multiple essays. (The average applicant’s SAT score is 2200.) It is a working cattle and alfalfa ranch but one with a rigorous liberal arts curriculum in the High Desert region of Southern California.

It was founded by an early California pioneer, LL Nunn in 1917 on his idea that the three pillars… academics, labor, and self-governance help young men prepare themselves for lives of service to humanity. The school’s 26 students, along with its staff and faculty, form a close community. The college operates on the belief that manual labor and political deliberation are integral parts of a comprehensive liberal arts education.

Plus, it is FREE. Each student attends for two years and receives a full scholarship valued at over $50,000 per year. Afterwards, most earn their undergraduate and graduate degrees at the world’s most prestigious four-year institutions. It is practically a “slam dunk” admission transition. Getting a first class education, and saving up to $110,000 in the process is not a bad way to invest two years. 

Now you know why I can say to some students that they will “not have a prayer” to being admitted. Ladies…that would be you. One intellectually curious young woman I shared this fact with, was undeterred. Because her goal is to become a college English professor, she saw that as way to be part of the Deep Springs community. (Professors from schools like Stanford, Harvard and Yale go there to teach periodically for a semester or two.)

But if you are a male and intrigued by the concept, why not take a college road trip like none other right now.   

2.) Another college that is respected for its’ philosophy of combining work with learning is The College of the Ozarks. COFO is committed to a five-fold mission of encouraging academic, Christian, cultural, vocational, and patriotic growth in its students.

All full-time students work rather than pay for their tuition. The college discourages debt and, like Hillsdale College, does not participate in any government loan programs. On the other hand COFO does participate in federal grant programs so the FAFSA will need to be filed, to determine eligibility. (Hillsdale does not use the FAFSA.)

Academic offerings are surprisingly broad as you can see here. This combined with the strong work program makes it a valuable experience and excellent preparation for a fulfilling life.

By the way, College of the Ozarks has been named a “Stone-Cold Sober School” by the Princeton Review for ten consecutive years.  Alcohol and drugs are strictly prohibited on and off campus. Therefore, a student who applies to the school with the nickname “Hard Work U.” and looks forward to spring breaks in Cancun, is unlikely to be a good fit for this college.

3.) In beautiful Southern California, high above the Pacific Ocean sits a relatively new college with a unique mission. Soka University  was founded on the Buddhist principles of peace, human rights and the sanctity of life, SUA is open to students of all nationalities and beliefs and is committed to diversity in its academic community.

Soka founders and faculty believe that student-centered education is the best way to promote peace and human rights by fostering a global humanistic perspective on the world in which we live. The university prepares students for graduate studies and the world of work in an increasingly diverse and global society.

In an age when the world is facing the prospect of perpetual war, this is a mission that mandates going beyond words, putting beliefs into action. Soka is a very small university with a big vision. If its core mission could be replicated in some manner by other colleges, that would be ideal. In any case, I believe Soka University is heading in the right direction.

Take a 360-degree tour of this incredible campus with buildings inspired by northern Mediterranean style architecture.  You will not believe what you see.  

4.) There are two St Johns Collegecampuses one in Sante Fe, New Mexico and the other in Annapolis, Maryland. There is little difference between the two, other than the natural beauty of the Santa Fe campus and the rich historic setting of Annapolis.  

St Johns is a college that bases its curriculum on the great books. The all-required course of study is based on the reading, study, and discussion of the most important books of the Western tradition. There are no majors and no departments; all students follow the same program.

Students study from the classics of literature, philosophy, theology, psychology, political science, economics, history, mathematics, laboratory sciences, and music. No textbooks are used. The books are read in roughly chronological order, beginning with ancient Greece and continuing to modern times.

All classes are discussion-based. There are no class lectures; instead, the students meet together with faculty members, called tutors, to discuss the books.

If you are interested in becoming a doctor, there is no lack of solid science learning at St Johns either. You will be well prepared for medical school, and their approach is explained here.  

So, you might be thinking “That‘s nice, but what can I do with a degree based on the study of the ancient writings and philosophical musings of dead white males?” The answer is…anything you want to do!

Here is how valuable you will be to a future employer (even if you are self-employed) once you learn how to think critically, discuss ideas rationally and write interestingly.  

5.) I wish there were more Universities like Bastyr University. I have had a life long interest in nutrition and wellness. My dad was a physician who was trained in the Allopathic tradition but who spent his professional career focused on nutrition and disease prevention. That made sense early on to me.

If you are teenager who wishes to become a medical doctor or enter the health sciences because you have a strong desire to help people, I encourage you look at this university. In fact, many bright men and women have gone on to become Naturopathic or Homeopathic physicians after they earned Doctor of Medicine degrees. But that does not have to be the route one takes. Spend time in high school studying the merits of each. 

There are pluses and minuses with each approach. For instance, if you were hit by a truck, a hospital emergency room would be the best place to be, not having a Reiki treatment. But if you want to understand the true connection between “mind and body” as it relates to optimal health and prevention of disease, the first step may be a 90-minute appointment with a physician who has been trained in that approach.  

Regretfully, Johns Hopkins and Harvard medical school et al do not train physicians in that manner.  

Bastyr is recognized as a pioneer in natural medicine. It is the largest university for natural health arts and sciences in the U.S., combining a multidisciplinary curriculum with leading-edge research and clinical training.

Graduate programs include naturopathic medicine, acupuncture and Oriental medicine, nutrition, and nutrition and clinical health psychology.  

Look here to see what they are doing for the greater Seattle community. This is the kind of clinical training students at Bastyr take advantage of in their undergraduate and graduate years.  http://www.bastyrcenter.org/

With the cost of health care rising along with metabolic diseases of all sorts, does it not make sense to focus on genuine prevention of disease as opposed to treatment of disease? That is Bastyr’s mission.

In the future I will highlight five more sets of less known schools that have admirable missions.  I hope that you see in this sampling of five unique colleges opportunities to explore that go beyond the traditional path of a typical high school student.

Let us be your guides. Call for a free get acquainted consultation today. Or, if you are a student we are already working with, and have not had a review of your college strategy recently, email or call.

If you are a current college student, are you always being asked, “What is your major?” 

If you have one, why did you pick that one?  Does the question annoy you because you feel that you are going to have to explain your decision? Perhaps you are not even sure why, thus making you feel more uncomfortable. 

I completelly understand if you are. But if you have already completed our insightful self-assessment and still are not comfortable with your academic direction, return to that online link now. It is resource to access all during your college years. (Call me if it has been misplaced.) One of things that we help students with while they are still in high school is to identify their innate characteristics. That is, what are their natural strengths and weaknesses that make up their core personality?  

Personalities, (barring some chemical changes in the body) pretty much remain the same throughout our lifetime. Interests, aptitudes and attitudes change. So, why not understand and appreciate who you are and explore the possibilities that stem from there? 

Our educational system is set up to take us from secondary school, where we are supposed to get a solid grounding in the basic academic subjects, and then on to college where we get to pick the courses we want.  Assuming college is necessary, however, are you in college to learn what you want, or are you there to learn what someone else wants? Whether it is a well-intentioned parent or prospective employer in a field that you are told, “pays well”? 

Recent Stanford University graduate, Scott Keys, has shared what I believe to be a very helpful insight relating his observations and recommendations. Hopefully, you are getting the kind of advice from your college advisors as to choosing a major that is personal to you and not “cookie cutter”. 

As he says, choosing a major is an important decision and “students are right to seek outside counsel when figuring out what they want to study”. Give us a call or contact us at the right, if you want to explore the possibilities. It all starts with a FREE “get acquainted” conversation.

By Scott Keyes 

One of my best friends from high school, Andrew, changed majors during his first semester at college. He and I had been fascinated by politics for years, sharing every news story we could find and participating in the Internet activism that was exploding into a new political force. Even though he was still passionate about politics, that was no longer enough. “I have to get practical,” he messaged me one day, “think about getting a job after graduation. I mean, it’s like my mom keeps asking me: What can you do with a degree in political science anyway?” 

I heard the same question from my friend Jesse when students across campus were agonizing about which major was right for them. He wasn’t quite sure what he wanted to study, but every time a field sparked his interest, his father would pepper him with questions about what jobs were available for people in that discipline. Before long, Jesse’s dad had convinced him that the only way he could get a job and be successful after college was to major in pre-med. 

My friends’ experiences were not atypical. 

Choosing a major is one of the most difficult things students face in college. There are two main factors that most students consider when making this decision. First is their desire to study what interests them. Second is the fear that a particular major will render them penniless after graduation and result in that dreaded postcollege possibility: moving back in with their parents. 

All too often, the concern about a major’s practical prospects are pushed upon students by well-intentioned parents. If our goal is to cultivate students who are happy and successful, both in college as well as in the job market, I have this piece of advice for parents: Stop asking, “What can you do with a degree in (fill in the blank)?” You’re doing your children no favors by asking them to focus on the job prospects of different academic disciplines, rather than studying what interests them. 

It is my experience, both through picking a major myself and witnessing many others endure the process, that there are three reasons why parents (and everyone else) should be encouraging students to focus on what they enjoy studying most, rather than questioning what jobs are supposedly available for different academic concentrations. 

The first is psychological. For his first two years of college, Jesse followed his dad’s wishes and remained a pre-med student. The only problem was that he hated it. With no passion for the subject, his grades slipped, hindering his chances of getting into medical school. As a result his employability, the supposed reason he was studying medicine in the first place, suffered. 

The second reason to stop asking students what they can do with a major is that it perpetuates the false notion that certain majors don’t prepare students for the workplace. The belief that technical majors such as computer science are more likely to lead to a job than a major such as sociology or English is certainly understandable. It’s also questionable. “The problem,” as my friend José explained to me, “is that even as a computer-science major, what I learned in the classroom was outdated by the time I hit the job market.” He thought instead that the main benefit of his education, rather than learning specific skills, was gaining a better way of thinking about the challenges he faced. “What’s more,” he told me, “no amount of education could match the specific on-the-job training I’ve received working different positions.” 

Finally, it is counterproductive to demand that students justify their choice of study with potential job prospects because that ignores the lesson we were all taught in kindergarten (and shouldn’t ignore the closer we get to employment): You can grow up to be whatever you want to be. The jobs people work at often fall within the realm of their studies, but they don’t have to. One need look no further than some of the most prominent figures in our society to see illustrations. The TV chef Julia Child studied English in college. Author Michael Lewis, whose best sellers focus on sports and the financial industry, majored in art history. Matt Groening, creator of The Simpsons, got his degree in philosophy, as did the former Hewlett Packard chief executive Carly Fiorina. Jeff Immelt, chief executive of General Electric, focused on mathematics. Indeed, with the Department of Labor estimating that on average people switch careers (not just jobs) two or three times in their lives, relying on a college major as career preparation is misguided. 

I’m not saying any applicant can get any job. Job seekers still need marketable skills if they hope to be hired. However, in a rapidly changing economy, which majors lead to what jobs is not so clear cut. Many employers look for applicants from a diverse background—including my friend who has a degree in biochemistry but was just hired at an investment consulting firm. 

That doesn’t mean that majors no longer matter. It is still an important decision, and students are right to seek outside counsel when figuring out what they want to study. But questioning how a particular major will affect their employability is not necessarily the best approach. Although parents’ intentions may be pure—after all, who doesn’t want to see their children succeed after graduation?—that question can hold tremendous power over impressionable freshmen. Far too many of my classmates let it steer them away from what they enjoyed studying to a major they believed would help them get a job after graduation. 

One of those friends was Andrew. He opted against pursuing a degree in political science, choosing instead to study finance because “that’s where the jobs are.” Following graduation, Andrew landed at a consulting firm. I recently learned with little surprise that he hates his job and has no passion for the work. 

Jesse, on the other hand, realized that if he stayed on the pre-med track, he would burn out before ever getting his degree. During his junior year he changed tracks and began to study engineering. Not only did Jesse’s grades improve markedly, but his enthusiasm for the subject recently earned him a lucrative job offer and admission to a top engineering master’s program. 

Andrew and Jesse both got jobs. But who do you think feels more successful? 

Scott Keyes is a 2009 graduate of Stanford University, where he majored in political science.   

Chronical of Higher Education

Borrowers Beware

Recently I have been asked to help recent college graduates who are faced with enormous student debt. In some instances they have had taken co-signer loans while in college. Those lenders like Sallie Mae were offering them in incredible amounts over the last 10 years. The rules varied as to when (and if) the credit worthy cosigner would be released from the obligation.

In 90% of the cases that will never happen and the lenders know that.  

This article is about the misinformation and complex terms in college lending. Unfortunately, Congress over the years has been heavily influenced by the lending companies (now being bailed out by taxpayer money) and the colleges themselves.

None of them have the student’s long-term best interest as a priority. That is a shame. To get a quick understanding of the problem listen to this.

At Programs for Education, we have options ambitious students can take advantage of to pay off their debt faster. If you know of any student facing enormous debt now or in the future, give us a call.  Many families are paying for college from cash flow alone with this program.

In addition. all current students can learn about the various loan forgiveness and debt relief programs for graduates entering certain fields of employment. In the meantime If a student is considering future college costs, now is the time to do a “Dry Run” to see how much they may have to borrow, if at all.

Not everyone would willingly choose to become the public face of the debt-ridden. Alan Collinge didn’t exactly choose to do so, defaulting on $38,000 in student loans only after a series of missteps and strokes of misfortune, but he has embraced his situation with gusto, founding StudentLoanJustice.org to advocate for distressed borrowers and now writing a book, The Student Loan Scam (Beacon Press).

Collinge’s tactics have at times been controversial — he has been criticized for personally attacking student loan lobbyists, for instance — but with the Obama administration putting the student loan programs front and center in its higher education agenda, the industry he writes about and his views are likely to remain relevant. In an e-mail interview, Collinge discussed his personal experiences and his assertion that none of the policy changes currently being debated will make a difference for borrowers without reform of federal bankruptcy laws.

Q. Can you give our readers the 1-minute version of how you ended up getting into such a jam with student loans? How much of your situation evolved because of your own (potentially flawed) decisions, and how much because of the unfair practices or policies or rules by other parties?

A. I originally borrowed $38,000 in FFEL loans for college, and graduated from the University of Southern California in 1999 with undergrad and graduate degrees in aerospace engineering. I took a job (with take home pay of about $2,000 a month) as a researcher at Caltech out of school, consolidated my loans with Sallie Mae, and began making regular payments of almost $400 a month. I took a night job as a waiter, but keeping to a budget proved difficult, exacerbated by expenses related to a minor car accident and money I had spent trying to develop an invention since graduate school. I left Caltech in the summer of 2001 hoping to secure a higher paying position in the defense industry. Unfortunately, the economy after September 11 left me unemployed/underemployed for more than a year.

In December 2001, I requested hardship forbearance, but Sallie Mae turned me down and put my loans into default. I tried repeatedly to negotiate a reasonable payment solution with Edfund, the guarantor, but they offered me no solution but to begin repaying on what had exploded to $80,000 by spring of 2003. I spent the next two years dealing with all manner of collection companies to negotiate a solution I could realistically afford, but by 2005, what had started as a $38,000 headache had become a $100,000 nightmare.

There is no doubt that my decisions after graduation contributed to my financial distress. I could have made wiser decisions about where to work out of college, and placed more emphasis on pay rather than other factors. I should have never left my job at Caltech without a solid position to go to. The fact that by 2002, I was working in a kitchen 90 hours per week for less than minimum wage was on account of my actions and mine alone.

However, the explosion of my debt from headache to insurmountable proportions had much more to do with the predatory environment that gives the industry a perverse incentive to default student loans. Like most borrowers, I did not realize until well after graduation that federal student loans were the only loans in the nation that are largely non-dischargeable in bankruptcy, have no statutes of limitations, and cannot be refinanced after consolidation. Nor do they realize that borrowers can have their wages, Social Security, and disability income taken without a court order, for example. Lenders are largely unwilling to negotiate with distressed borrowers, and act in a predatory fashion.

Had there been standard consumer protections in place to motivate the lending system (Department of Education included) to avoid default, I am certain that my forbearance would have been granted, and today I would likely be nearing payoff of my loans.

The systematic removal of standard consumer protections from student loans gave rise to a predatory guaranty and collection industry that, armed with the strongest and most ruthless collection powers ever allowed, proceeded to extract massive revenue from misfortunate borrowers. Many would consider this a success in government-business partnerships, given the profits for the lenders and the protection of the U.S. taxpayer. But the resulting system gave all parties involved an interest in a high default rate (there is some debate about the federal government’s fiscal incentive, but for all other parties, there is no debate), rewarding the system for providing horrible loan administration, confusing the borrowers, providing them with ridiculously bad, incomplete, misleading, and even dishonest information. Some lenders were even caught falsifying documents, and defaulting loans without ever attempting to collect on the debt.

The human cost of this system has been shameful. Millions of citizens have been strong-armed into either repaying several times more than they originally borrowed or being effectively relegated to second-class citizens. Many have literally fled the country as a result, or even worse. Finally and importantly, the system has caused an inflationary spiral in tuition and other costs charged by our nation’s colleges and universities. This affects everyone who attends college and their families — borrowers and non-borrowers alike.

Q. There are many people who tend to think that the troubled borrowers whom your group represents have brought their problems on themselves. To what extent is that fair, and to the extent it’s not, why not?

A. Personal responsibility in assuming and repaying debt is always important, as with any other type of lending system. However, this principle of personal responsibility has been used as a cover for corporate and governmental irresponsibility and predation for far too long. The disastrous effect this has had on millions of individual citizens, and for the public interest generally, is now becoming evident, and no amount of spin, personal attacks against borrowers, etc., can change the incontrovertible facts, and the logical conclusions that must be drawn from them.

One example: in the 1970′s, the industry used anecdotal stories of students graduating college and then promptly filing for bankruptcy to convince Congress to restrict, and then ultimately remove, bankruptcy protections. This was a successful trick (for lack of a better word) that appealed to emotion rather than reason. In hindsight, it turns out that in fact, far less than 1 percent of federally guaranteed student loans were discharged through bankruptcy when they were treated as all other loans in the country.

Q. What are the two or three biggest problems with our current system of financing college enrollment for students and families, in your view?

A. There is only one core problem: The removal of standard consumer protections (such as bankruptcy rights, statutes of limitations, refinancing rights, and other free market protections) from the student loan system. This has caused other problems:

1. This removal had caused predatory behavior by the lending and collection industry.

2. The system has also demotivated the Department of Education. Because it has no financial interest in whether or not students default (arguably, it may be actually making, not losing, money from defaulted loans), it does not act in a way to ensure that students don’t default. So, the Department no longer has an incentive to pressure universities to keep their costs low, their quality high, and the time in attendance low, and we all know the results. ED/lenders/universities can feebly point to penalties against lenders and schools for high default rates as sufficient incentive for them to want to avoid defaults, but it is well known that this “cohort” default metric is very easily manipulated — even under the new definition — and is really a paper tiger. They would really would do better to be honest and admit it. The American public will greatly appreciate — and is capable of handling — candor, forthrightness, and complete/accurate information from the department, as opposed to the misinformation, disinformation, and lack of information that has come to be a hallmark of the Federal Student Aid office.

3. The system has also enabled the colleges to raise their tuition and other fees at double the rate of inflation for over 30 years now, which only exacerbates the problem for the borrowers, and extends it to affecting everyone who attends college — non-borrowers and borrowers alike.

Q. The student loan industry has been very much on the defensive in the last couple of years, first from New York’s attorney general and now from the Obama administration. I had more or less assumed that you would be a cheerleader for the White House plan to end the lender-based guaranteed student loan program, given your experiences, but I have seen comments from you suggesting otherwise. What don’t you like about the move to 100 percent direct lending?

A. I take no strong position on this debate. Any systems architect would be compelled to admit that it is more efficient, structurally. But whether it is a direct- or private-lender based system, the lack of consumer protections only ensures that the future system will be wrongly motivated, and the problems that arise from that will be perpetuated and enlarged. Private companies will likely be both servicing and collecting on student loans under the proposed system. This will likely sustain the same perverse incentives to default loans. In the absence of other revenue that they formerly had under the FFEL system (origination fees, interest, and subsidies), this incentive could even be increased, without strong and clear instruments in the contract language that guard against it.

Q. What should be done to improve the student loan system?

A. It’s simple. In the public interest, Congress should act decisively to return standard consumer protections to student loans, and also to terminate some of the more debilitating collection powers, such as state license suspension and seizing the Social Security income of senior citizens (for example).

— Doug Lederman

Inside Higher Education  

Over 100 comments to this article there.

By Kim Clark , US News & World Report 

Operating on the theory that it takes a thief to steal from a thief, a group of Internet scammers has been targeting students who illegally download music, books, and video.

The Chronicle of Higher Education has reported on an apparently bogus collections agency that sent out letters to Bucknell students demanding $500 to settle the students’ alleged illegal downloads.

That’s a new twist on an old strategy of targeting college students. Prosecutors say there are at least six common scams students should watch out for:

1. Fake scholarship promises: The Federal Trade Commission warns against advisers and Web services that charge big fees in return for help locating scholarships.

2. Dodgy student loans: U.S. News‘s Kim Palmer documented how some students have been misled by official-looking documents that were really ads for expensive loans.

One silver lining of the recent economic downturn is a reduction in expensive private loans and lenders. But the FTC says students still need to make sure they stick with low-cost, legitimate education loans. The best deals, says the Project on Student Debt, are the federally backed student loans such as the Perkins (which charges just 5 percent in interest) and Stafford loans.

3. Untrustworthy counselors: While there are many legitimate, private, fee-based counselors who can help students refine their college choices and negotiate the financial aid maze, there are some charlatans, as well. Michael Traynor, a once prominent college financial aid adviser in Florida, got caught stealing from his clients, many of whom he met in church. He is now in prison.

4. Illegal downloads: As tempting as it can be to save money by downloading free music, movies, or textbooks, many of the downloads contain spyware that can end up causing financial havoc. Illegal downloaders are also more vulnerable to the new collections scams.

5. Diploma mills: Lots of online universities, many with impressive-sounding names, are luring students with offers of credit for “life experience” and cheap degrees. But beware: Sometimes, you get what you pay for. A cheap diploma from “The University of Berkley” won’t get you the job, salary, or recognition that comes from a real degree from the University of California-Berkeley. The FTC, Department of Education, and several state agencies, such as this one in Oregon, can help students avoid paying for degrees that other schools and employers won’t recognize.

6. Term papers and other cheating supplies: The Web has made it a snap for lazy and dishonest students to find term papers, lecture summaries, and even test questions and answers. But universities are increasingly using new software like Turnitin, Web honey pots (websites set up by professors to attract and catch cheaters), and spy cameras to track down dishonest students. Even if you get an A on that purchased term paper, it’s still a scam, since you’ve paid lots in tuition and cheated yourself of learning.